CANBERRA OBSERVED: Can Beazley win on workplace relations?

The new workplace relations legislation is the Howard Government's riskiest move, and it is the Coalition which is more vulnerable on this issue than Mr Beazley.

The battlelines for the next election have now been drawn following Kim Beazley's bold decision to axe Australian Workplace Agreements (AWAs) if he wins office.

The move has galvanised both the Opposition and the Coalition, which now have the clearest policy divide on industrial relations. But both cannot be right.

While the last election was fought over interest rates, schools funding and the unknown, divisive figure of Mark Latham, this election will be fought on the economy, unemployment and industrial relations.

Mr Beazley is arguing that the new workplace relations laws go too far; were never wanted in the first place - even by business; and are ideologically driven by the Liberal and National parties which are using them to break the union movement and its political arm, the Australian Labor Party.

Certainly, Mr Beazley's move has managed to unite Labor in a way it has not been for three or four years, and has (probably) cemented his own leadership. He has given the party something to fight for.

On a winner

But the Prime Minister John Howard is also giving the impression he is on a winner. He argues that Mr Beazley's decision to axe AWAs is another "backflip", a cave-in to unions, and further evidence that Labor's leader is weak and economically backward-looking.

Mr Howard's confidence on this issue should not be a surprise given that that industrial relations has been his policy forte for over 30 years.

Mr Howard understands it, has clear and unequivocal convictions about a deregulated labour market, and has had long experience, in both government and opposition, in the gradual dismantling of the old rigid industrial relations system.

Furthermore, the economy is still booming, despite the hangover of the Sydney property bust, and unemployment has ducked under 5 per cent for the first time since the mid-1970s.

But this must be close to a low point in the cycle, given that the remaining jobless consist of mostly older, unskilled and entrenched unemployed males, who all need special, targetted assistance to get back into work.

In any case, the boom in new jobs has been achieved entirely via the existing workplace system, and on the back of an unprecedented boom in commodities.

The danger for the Government is what may happen if and when things start to turn sour and unemployment begins to creep up again.

Already, ruthless employers are using the new system to rip away penalty and weekend rates, extra pay on public holidays and a host of other allowances from First Aid to tool allowances.

And again, quite legally, employers are offering AWAs to new employees without compensating for the lost benefits - or, in the notorious Spotlight case in Coffs Harbour, just two cents an hour extra.

Strangely, no one in the Government saw this coming.

In a booming economy, economic theory suggests it should be a workers' market - they should be in a position to demand higher wages, and negotiate better deals.

But the fact is there is not one labour market, but hundreds of labour markets in towns and regions around the country. The Spotlight shop assistant is not in the same bargaining position as a monster-truck mechanic in the Pilbara.

And, even in a booming economy, a single, unskilled or lowly-educated employer is never going to be on a level-playing field with a multinational company.

The fact is, despite the Government's bravado, behind the scenes there is more concern about the new IR laws in Government ranks than it cares to admit.

The Government has been stung by the number of early instances of employer exploitation of its new laws.

And it knows the public are extremely uncomfortable about a system which allows employers to strip away penalty rates, paid public holidays and other benefits.

So far, it seems the new system provides an opportunity for employers to keep wages low.

And, if unemployment rises, it will be a slow-burning disaster for the Government.

After the introduction of the GST, the new Workplace Relations legislation is the Howard Government's riskiest move, and it is the Coalition which is more vulnerable on this issue than Mr Beazley.

Unless there are moves to water down the new laws, it is difficult to see how, at a minimum, the Coalition will not lose seats at the next election.